Lady Butterfly's journey to financial independence

Menu

Step 3: Become An Accredited Investor

The third step of my five year plan to FI/RE is to become an accredited investor. Given that most of my assets are tied up in my primary home, and the primary home does not count as part of the assets required to be an accredited investor, I have some work to do. The requirements to become an accredited investor is to have an annual salary of at least $200K for singles and $300K for married couples, or have a net worth of at least one million, not counting your primary home. For me to achieve this, that means I need to invest, invest and invest in the stock market.

Some of my ex-coworkers lost big in the tech bubble in 2001 and that scared me from heavily investing in my early years. The worst part was a couple of them bought their options to hold, and then they got laid off. They ended up with a huge tax bill and no salaries to pay. Luckily, I just started working, so I didn’t have much to lose. I probably loss enough to buy a nice BMW, but not nearly as much as some of my older c0-workers.

I funded my 401k when I started my job, but I was not maxing it out. I was putting all my savings in a money market for a down payment. It was not until 2006 that I started to max out my 401k, and around the same time funding a Roth IRA. When the market crashed around 2008-9, that’s when I slowly got back into the market, and picked up a couple of index funds and value stocks. I bought my home in 2006-7 with a ~40% down payment, so that cleaned out my savings. And as some of you know 2006-7 was the peak of the real estate market in the SF Bay Area, before it crashed. Strike 2! So far I had the worst timing in the real estate market.

After refinancing my home four times, I am down to about a 15% loan-to-value, and a monthly payment that’s less than 1k. At the same time, I have also built a hefty 2 to 3 years emergency fund and invested about 1 year worth in I-Bonds. At this point, I don’t need more cash cushion, unless I want to invest in another rental. But with the Las Vegas rental situation, I am turned off by the idea of being a landlord again. Who knows? When my boyfriend and I do move in together, I do want to eventually buy a bigger place to live. If I do, then my current place will be my next rental.

My plan for the next five years with the extra cash I have each month is to invest, invest and invest in index funds, REITs, and dividend stocks. I am open to any kind of investment that gives me a high return in dividend or interest. I have not started the peer-to-peer lending, but I might consider doing it in the near future. I am also looking into investing in crowd funding in large scale real estate investments. This is after I pay off my monthly mortgage payment and after I invest in muni bonds in step 1. The stock market is almost back at it’s all time high again. I hope third time is the charm and leads me to FIRE. I am excited what the future holds.

Post navigation

4 thoughts on “Step 3: Become An Accredited Investor”

Interesting. It seems like you have had quite the financial journey. Its good that you got into the market in 2008-2009 when stock prices were lower. You must be enjoying a nicer return now. Wow 2-3 years of emergency fund. That is fantastic. Once I get to 1 year I will feel ok, but for now my husband and I only have about 6 months saved and we are ok with that as we continue to beef up other savings. In addition to investing in the stock market we have 4 individual DRIP stocks that we are slowly growing and that will provide us with good dividend income in the future (we hope). We don’t put alot of money in them, just here and there when we can, but we try and stay diversified as well.
You seem determined enough to get your accredited investor license so I am sure you will. All the best. Looking forward to future posts.

I have made my fair share of bad investments, or just bad timing, but my saving grace is that I am a saver. I have always been a saver, and I think as long as I continue to save and invest, I will be just fine in the long run. All the markets will eventually bounce back in my lifetime. Thank you for reading.

You and your husband are doing a wonderful job. If you could pay off $120k in 2.5 years, you are definitely doing something right. DRIP stocks are great. I have them mostly in my retirement accounts, and I don’t need to monitor them frequently, since they are automatically reinvesting. I think if a person is not stock market savvy, diversification and dollar cost averaging are the key to success. Good luck and I hope you continue to save at that awesome pace.